US Fed pledges low rates, mulls more stimulus to boost economy

Federal Reserve chairman Ben Bernanke said on Wednesday that the US central bank was ready to offer the economy additional stimulus after it announced it would likely keep interest rates near zero until at least late 2014.

Federal Reserve chairman Ben Bernanke said on Wednesday that the US central bank was ready to offer the economy additional stimulus after it announced it would likely keep interest rates near zero until at least late 2014.

The Fed also took the historic step of adopting an explicit inflation target, though Bernanke said that officials would be flexible about reining in prices when unemployment was too high.

The announcement led to a rally in US government bonds.

Speaking at a news conference after a two-day policy meeting, Bernanke was cautious about recent improvements in the US economy, and he left the door open to further Fed bond purchases. “I don’t think we’re ready to declare that we’ve entered a new, stronger phase at this point. If the situation continues with inflation below target and unemployment declining at a rate which is very, very slow, then ... the logic of our framework says we should be looking for ways to do more.”

In response to the deepest recession in generations, the Fed slashed the overnight federal funds rate to near zero in December 2008. It has also more than tripled the size of its balance sheet to around $2.9 trillion through two separate bond purchase programmes.

He, however, declined to announce a target for unemployment, and said that the job market was often influenced by forces beyond government control.